Izmail, Reni and Ust-Dunaisk. How the Ukrainian ports on the Danube changed during the year of the war

Russia’s blockade of Ukrainian seaports has caused a lot of damage to our country. However, where problems arise, new opportunities appear. It was because of the blockade by russian federation that the Ukrainian ports on the Danube were able to activate and even equalize the actual cargo traffic with the passport traffic. USM tells what the year of war turned out to be for the Danube ports, and what Izmail, Reni and Ust-Dunaisk should expect this year.

From the end of February until August, russia blockaded major Ukrainian seaports. Every day during the seaport blockade, Ukraine lost $170 million (this is the amount together with the occupied ports on the coast of the Sea of Azov). In fact, at that time only the ports of Izmail, Reni and Ust-Dunaisk remained in Ukraine. However, the need to export grain did not disappear, so port, agricultural and logistics companies directed their efforts and investments to the Danube ports of Ukraine. Some companies have moved their entire business to this region.

Already in August, Ukraine agreed to launch the “Initiative for the safe transportation of grain and food products” from Ukrainian ports, also known as the “Grain Initiative”. So, three of our seaports have reopened for export – only agricultural exports, however.

Of course, the ports on the Danube neither in the past nor now can compete with the sea ports of Odesa region. However, throughout the year, the ports of Izmail and Reni increased the volume of transshipment, and proved that investors did not leave the region – even in spite of more attractive and familiar sea ports.

In general, the year 2022 proved that Ukraine needs several export routes. The Danube region saved exports even when russia tried to disrupt the continuation of the “Grain Initiative” in November. But, despite the interest of investors in the work of the Danube ports, the region still has certain obstacles for the construction of a powerful export hub on the Danube.

The main problems of the Danube ports

River transportation was not always feasible for exporters. In “pre-war” times, the Ukrainian government did not bet on the Danube ports for a number of reasons. After all, in addition to the inability to compete with other ports of Ukraine, the Danube also cannot compete with the ports of Romania or Bulgaria.

In addition, upgrading and bringing the ports of Reni and Izmail to a competitive level would cost too much, and that is without guarantees of stable cargo flows.

The share of Danube ports in the total transshipment in Ukraine in 2018-2021 was at the level of 2.5-4.2%, or 4-6 million tons of cargo. This is a joint annual indicator. Before the war, these ports were used only by a narrow “pool” of cargo carriers – either for export via the Danube River or small consignments by sea to Turkey.

The actual throughput, of course, was much less than the design. Thus, the port of Izmail is capable of handling 8.5 million tons, the port of Reni – 8 million tons, and the port of Ust-Dunaisk – 4 million tons of cargo per year.

However, the limited existing infrastructure, insufficient depths and shipping problems with the Romanian side made the Danube ports unattractive for companies. In fact, the investor did not go there primarily because of the lack of economic benefit. Also, the government did not want to modernize them because of their unattractiveness. A closed circle of sorts.

As USM noted earlier, in 2021, the cargo turnover of ports on the Danube was quite low: the port of Izmail handled 3.9 million tons, Reni – 1.37 million tons, Ust-Dunaisk – only 64.3 thousand tons. For comparison: the cargo turnover of the Odesa port in the same year amounted to 22.55 million tons, and Chornomorsk – as much as 25.63 million tons.

Region changes

The war changed everything, so investors finally “saw” the Danube region: the ports on the river were operating during the blockade. Basically, the ships exported products from them to Romania through the Sulina estuary.

By increasing transshipment in the first half of the year, the Danube ports proved that the region is capable of helping Ukraine with exports. It was in the summer of 2022 that officials started the first conversations about large plans for the modernization of ports on the Danube. This became especially noticeable after the de-occupation of Zmiinyi Island (since the beginning of July), which opened traffic through the channel of the Bystre estuary. In this way, it was possible to unload the Sulina Channel raid and double the speed of grain exports in the region. Only in the first two weeks after its opening, about 70 ships passed through the estuary.

So far, in the annual summary, the Danube ports have demonstrated record transshipment figures for themselves. The total transshipment of goods here has increased by 3 times.

Port Reni exceeded its own figures by 5 times in cargo handling volumes. According to the results of the year, 6.82 million tons were handled in the port – against 1.37 in 2021. Port Izmail – doubled: in 2022 – 8.89 million tons, against 4 million tons a year earlier. Ust-Dunaisk — 785 thousand tons, against 64 thousand tons in 2021. In general, the Danube ports have almost equalized the actual and projected transshipment.

In general, corn, wheat and sunflower oil were the most exported in three ports. The best export performance was achieved by SE “Izmail Sea Trade Port”. In second place is State Enterprise “Reni Sea Trade Port”. On the third is Dunaysudnoremont PJSC.

In the second half of the year, the government has already started active modernization of ports on the Danube. Thus, USPA implemented an electronic queue of ships in the region, increased the number of pilots from 16 to 40, reached an agreement with Romania on the modernization of the infrastructure of the Sulin Canal. Also, in the second half of the year, a container terminal was opened in the port of Reni, despite the fact that up to that time the Danube ports did not handle containers at all.

In addition, from May to November, the government carried out operational dredging in the waters of the Izmail port. The work was completed by December, the total amount of dredging was about 710 thousand cubic meters. Also, since August, USPA has been carrying out operational dredging in the port of Reni. In general, there are plans for an indicator at the level of about 100,000 cubic meters already by the second quarter of 2023.

Already this year, on January 17, the State Property Fund of Ukraine successfully privatized the Ust-Dunaisk port at an online auction. The sale became a booster not only for the Danube region, but also the first sale of a state port in the history of independent Ukraine. During the auction, the starting price more than tripled — from UAH 60 million to UAH 201 million, and as many as 8 participants competed for the right to privatize the port.

“Before the Great War, almost everyone forgot about Ust-Dunaisk, but it was one of the first to resume work after the full-scale invasion of the russian army. It has great potential for the development of Ukrainian food exports. But this requires investments that can be brought by private business,” says Rustem Umyerov, head of the State Property Fund.

What will happen to Ukrainian ports on the Danube?

Against the background of such impressive results, the government has already promised to increase the capacity of ports this year. As reported by the Ministry of Infrastructure, in the plans for the development of Danube ports:

• dredging;

• further implementation of the “Danube – Black Sea” deep-sea navigation project;

• construction of the inland navigation fleet;

• repair and modernization of the existing fleet;

• involvement of a used fleet for the fastest possible effect;

• construction and modernization of access railway tracks;

• creation of conditions for unimpeded road traffic.

In general, the program for the development of cargo transportation from Danube ports to MIU was estimated at $200 million of investment.

In addition, the government plans to build new terminals and hubs, connect the ports of Reni and Izmail by direct rail, and attract private investment for the construction of terminals.

All this demonstrates that the market will not lose interest in the Danube ports this year. Business is ready to develop the region even with working “grain corridors”, and some companies are already building terminals in Danube ports. Among them is Nibulon, which completed the first stage of construction of a new grain terminal in Izmail in 2022. As noted by the general director of “Nibulon” Andriy Vadaturskyi, after the full completion of the construction, the Izmail terminal of JV “Nibulon” will be able to process up to 300 thousand tons of grain per month. In February 2023, the terminal already processed more than 150,000 tons for export.

In January-February, Ukraine has already implemented a number of projects in ports on the Danube.

So, for example, dredging of the Bystre estuary was carried out. This immediately improved the cargo turnover of the ports – after the restoration of the passport depths on the Ukrainian section of the Danube River and the announced draft of 6.5 meters, the ports reached a record value of 12 vessel calls per day. In addition, a tripartite meeting between Ukraine, the European Commission and Romania took place in February. The parties agreed to coordinate efforts to improve export capacities through the Ukrainian and Romanian channels of the Danube River.

All of the above proves that Ukrainian ports on the Danube have a more predictable future than deep-sea terminals on the Black Sea. Because a large logistics hub in this region is a reliable plan “B” for Ukraine, in case the Russian Federation ultimately fails the “Grain Initiative”. Our country needs to be ready for any development in the “export war”, so keeping a powerful weapon in the form of ports on the Danube is the most reliable plan.